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XNPV. Product and service reviews are conducted independently by our editorial team, but we sometimes make money when you click on links. Don’t try to learn lists of formulas. How GPS Works? I cover various small business topics, including technology, financing and marketing. The first step in creating an acronym as a mnemonic device is to break the equation down into its initials, as I have, above. A = L+O. Accounting ratios offer quick ways to evaluate a business's financial condition. Because of this, the accounting equation will be the key to everything you do in accounting. Here's... What is accounting? To run a successful business, you must have a clear picture of where you stand at any given time. Work through equations involving assets, liabilities, and equity and the relationship between these three accounting terms. In this article, I will focus on some of most common accounting and financial formulas you can use for basic to complex calculations. The formula is: Assets = Liabilities + Shareholders' Equity The three components of the basic accounting formula are: Assets . If you tend to remember the last place you put something by trying to visualize where it was that you placed that thing, this might be an easy way to remember the accounting equation for you. Check out this infographic. 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